• Jim Cramer warned investors on Wednesday not to invest in digitization stocks while the potential of a recession looming.
• “You can’t rationalize owning them unless you believe the [Federal Reserve] will rapidly beat inflation without doing much more to harm the economy,” the “Mad Money” host added.

Jim Cramer warned investors on Wednesday not to invest in digitization stocks while the potential of a recession looming.

“You can’t justify owning these unless you believe the [Federal Reserve] will quickly beat inflation without needing to do much more to damage the economy. I think that’s a real possibility, but I wouldn’t want to bank on it by owning too many enterprise service companies,” he said.

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The “Mad Money” host’s remarks came after the three major indices fell slightly on Wednesday, as investors remain concerned about the possibility of an economic downturn.

According to Cramer, while digitization is unavoidable and the current economic upheaval is not on the same scale as the dot-com catastrophe, a recession may deal an unforgiving hit to the business.

“If the economy goes into a real recession – I mean a big stagflation tailspin – the pool of potential clients will indeed shrink. The digitizers can’t make as much money if their customers are strapped for cash,” he said.

Cramer added that a frozen IPO market could also lead to “serious shortfalls.”

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“There won’t be enough new clients, many of the existing ones won’t have enough money and there are too many competitors in this space fighting, perhaps, over a shrinking pie,” he said.